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Twenty Fourth Annual Willem C.

Vis International Commercial Arbitration Moot

ROYAL UNIVERSITY FOR WOMEN

Memorandum for RESPONDENT

On behalf of: Against:


SantosD KG, Mediterraneo Wright Ltd, Equatoriana
“RESPONDENT” “CLAIMANT”

SARA JASSIM ABDULLA • FATEMA AHMED ALARAIJ • NOOR SAMI ALALAWI


ISRA ABDULKARIM ALARADI • HAYA ZAAL ALBUFLASA • FATEMA FADHEL ALMEDAIFA
REEM HASSAN EL-ASSAD • NAYLA MOHAMED RAMADHAN • AMINA ABDULJABBAR SALEH

RIFFA • KINGDOM OF BAHRAIN


ROYAL UNIVERSITY FOR WOMEN

TABLE OF CONTENTS

TABLE OF CONTENTS .............................................................................................................. I


INDEX OF ABBREVIATIONS.................................................................................................. V
INDEX OF AUTHORITIES .................................................................................................... VII
INDEX OF CASES .................................................................................................................. XVI
INDEX OF ARBITRAL AWARDS……………………………………………...…………XXII
STATEMENT OF FACTS ........................................................................................................... 1
INTRODUCTION......................................................................................................................... 3
ARGUMENT ................................................................................................................................. 4
ISSUE 1: THE TRIBUNAL SHOULD GRANT RESPONDENT’S REQUEST FOR
SECURITY FOR COSTS ............................................................................................................ 4
A. The Tribunal Should Exercise its Power and Order CLAIMANT to Provide Security for
Costs ............................................................................................................................................ 4
I. The Authority of the Tribunal to Order Security for Costs Derives from the Lex Arbitri ... 4
1. The CAM-CCBC Rules Grant the Tribunal the Authority to Order Security for Costs 5
2. The UNCITRAL Model Law Entrusts the Tribunal with the Power to Order Security
for Costs ............................................................................................................................... 5
a. RESPONDENT Met the Test for Obtaining Security for Costs under the UNCITRAL
Model Law and the International Arbitration Practices ................................................... 5
II. The Parties Agreement on Security for Costs is Unessential ........................................... 7
III. Ordering Security for Costs is Widely Accepted in International Arbitration Practice .. 7
B. An Order for Security for Costs is Indispensable as there is a Substantial Risk that
CLAIMANT will not Comply with an Award for Costs ................................................................ 8
I. CLAIMANT Has Serious Financial Difficulties which Justify an Order for Security ......... 8
II. RESPONDENT Will Face Obstacles in Enforcing a Potential Award for Costs ............... 10
C. Not Awarding RESPONDENT with Security for its Costs Violates the Principle of Due
Process ....................................................................................................................................... 10
I. RESPONDENT Fulfilled all its Contractual Obligations Under the Development and Sales
Agreement ............................................................................................................................. 11

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II. Ordering Security for Costs Does Not Constitute a Prejudgment on the Merits of the
Case ....................................................................................................................................... 11
CONCLUSION OF THE FIRST ISSUE .................................................................................. 12
ISSUE 2: THE TRIBUNAL SHOULD DISMISS CLAIMANT’S REQUEST AS BELATED
AND THEREFORE INADMISSIBLE ..................................................................................... 13
A. CLAIMANT’S Request and Supporting Documents Did Not Satisfy the Criteria Set Out in
Art. 4.1 and 4.2 CAM-CCBC Rules ......................................................................................... 13
I. The First Power of Attorney Submitted by CLAIMANT is Invalid .................................. 13
II. The Error in the Registration Fee Paid by CLAIMANT is a Substantial Error ................. 14
B. CLAIMANT Did Not Initiate the Arbitral Proceedings in Accordance with Section 21 of the
Development and Sales Agreement nor the Lex Arbitri ........................................................... 14
C. The Dies a Quo for Initiating Arbitration Agreed in the Development and Sales Agreement
is Sixty Days after the Failure of Negotiations ......................................................................... 15
I. Negotiations Failed on the 1st of April 2016, Therefore CLAIMANT Request Was
Overdue .............................................................................................................................. 15
II. CLAIMANT’S Request is Belated Under Art. 21 of UNCITRAL Model Law ................. 16
CONCLUSION OF THE SECOND ISSUE ............................................................................. 17
ISSUE 3: CLAIMANT IS NOT ENTITLED TO THE ADDITIONAL PAYMENT OF US
$2,285,240 FOR THE FAN BLADES ....................................................................................... 18
A. The Tribunal Should Not Award CLAIMANT the Sum of US $2,285,240 for the Fan Blades
Under Both CISG and UNIDROIT Principles .......................................................................... 18
I. RESPONDENT Fulfilled Its Obligations Under Art. 59 CISG ............................................... 18
1. The Price for the Fan Blades Must be Calculated According to Section 4 of the
Development and Sales Agreement …………………………………………………….19
a. RESPONDENT Paid the Purchase Price for Both Fan Blades and Clamps According to the
Attached Invoice and in Compliance with Art. 53 CISG………………………………………..20
i. The Invoice Sent by CLAIMANT was In Accordance with the Addendum, Thus Art.
3.2.3 UNIDROIT is Not Applicable ........................................................................... 20
b. CLAIMANT May Not Invoke Art. 62 CISG Since RESPONDENT Paid the Amount Due…21
II. Art. 7.1.1 and 7.1.5 of the UNIDROIT Principles are Not Applicable to the Case at Hand
21

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B. In the Addendum the Parties Agreed to Apply the Fixed Exchange Rate for Both Fan
Blades and Clamps .................................................................................................................... 22
I. The Parties Intention Should be Determined According to Art. 8.1 CISG ..................... 22
II. Under Art. 8.2 CISG, 4.1 and 4.2 UNIDROIT Principles a Reasonable Person Would
Interpret The Fixed Exchange Rate to Be Applied to the Whole Agreement ....................... 23
III. In Earlier Contracts, Parties Adopted the Exchange Rate Which Was Profitable for
RESPONDENT .......................................................................................................................... 25
1. Under Art. 8.3 and 9.1 CISG, the Parties Are Bound by their Previous Practices...... 25
IV. The Parties Must Respect the Terms in the Addendum Under the Principle Pacta Sunt
Servanda ................................................................................................................................ 26
C. CLAIMANT is Not Entitled to Interest Under Art. 78 CISG ................................................. 27
CONCLUSION OF THE THIRD ISSUE ................................................................................. 27
ISSUE 4: CLAIMANT IS NOT ENTITLED TO THE REIMBURSEMENT OF THE
INSPECTION FEES DEDUCTED BY THE CENTRAL BANK .......................................... 28
A. The Tribunal Should Not Order RESPONDENT to Pay the Amount of US $102,192.80 for
the Inspection Fees According to the CISG .............................................................................. 28
I. RESPONDENT Fulfilled Its Obligations Under Art. 53 CISG, Whereas CLAIMANT
Breached Art. 35.2 CISG ....................................................................................................... 28
II. CLAIMANT’s Respect of Art. 30 CISG Does Not Imply RESPONDENT’S Obligation to
Pay the Inspection Fees ......................................................................................................... 30
III. RESPONDENT Undertook the Proper Steps to Enable the Payment of the Purchase Price
According to Art. 54 CISG .................................................................................................... 30
B. RESPONDENT Is Not Obliged to Pay the Extraordinary Bank Charges for the Money
Laundering Investigation According to the Development and Sales Agreement and
CLAIMANT’s Previous Practices ................................................................................................ 31
I. In Section 4.3 Development and Sales Agreement the Parties Agreed that RESPONDENT
Would Bear Only Ordinary Bank Charges…………………………………………………31
II. In Any Case, RESPONDENT Could Not Have Foreseen the Inspection Fees as No
Comparable Fees Exists in Mediterraneo .............................................................................. 32
III. In Previous Dealings CLAIMANT has Always Paid the Inspection Fees........................ 32

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C. RESPONDENT Fulfilled Its Obligations by Bearing the Costs of the Performance According
to the UNIDROIT Principles..................................................................................................... 32
I. Article 6.1.11 UNIDROIT Principles Does Not Encompass Inspection Fees, Therefore
RESPONDENT Is Not Obliged to Reimburse CLAIMANT ............................................................ 33
CONCLUSION OF THE FOURTH ISSUE ............................................................................. 33
REQUEST FOR RELIEF 
 ....................................................................................................... 34
CERTIFICATE ....................................................................................................................... XXV

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INDEX OF ABBREVIATIONS

Art. Article
CAM-CCBC Rules Center for Arbitration and Mediation of the Chamber of
Commerce Brazil-Canada Rules
CAM-CCBC Center for Arbitration and Mediation of the Chamber of
Commerce Brazil-Canada
CEO Chief Executive Officer
CFO Chief Financial Officer
CISG Digest United Nations Convention on Contracts for the
International Sale of Goods Digest
CISG United Nations Convention on Contracts for the
International Sale of Goods
CISG-AC CISG Advisory Council
CL MEMO Opposing Claimant Memorandum
COO Chief Operating Officer
DSA Development and Sales Agreement
EQB Equatoriana National or Central Bank
EQD or EQ Denars Equatorianian Denars
Et al. And others
Exh. Exhibit
ML Money Laundering
No. Number
NYC Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (the "New York Convention")
Para Paragraph
Pg. Page
PO.1 Procedural Order 1
PO.2 Procedural Order 2

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POA.1 Power Of Attorney 1


POA.2 Power Of Attorney 2
R$ Brazilian Dollars
RSF Respondent Statement of Facts
UML United Nations Commission on International Trade Law
Model Law
UNCITRAL United Nations Commission on international Trade Law
UNIDROIT International Institute for the Unification of Private Law
US$ United States Dollar
v. versus

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INDEX OF AUTHORITIES

Andersen, Camilla A Practitioner's Guide to the CISG


New York (2010)
cited as: Andersen
in para. 47

Berger, Bernhard Arbitration Practice. Security for Costs: Trends and


Developments in Swiss Arbitral Case Law
Association Suisse de l'Arbitrage in: ASA Bulletin,
28(1), (2010)
cited as: Berger
in para. 13

Bonell, Michael The CISG and UNIDROIT Principles of International


Commercial Contracts, Two Complementary Instruments
(2008)
Available at:
http://www.cisg.law.pace.edu/cisg/biblio/ulr96.html
cited as: Bonell

Born, Gary International Commercial Arbitration


2nd ed., Alphen aan den Rijn (2014)
cited as: Born
in para. 7, 10, 13, 16, 19

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Butler, Allison Performance and Obligations under CISG


(2007)
Available at:
http://www.cisg.law.pace.edu/cisg/biblio/butler4.html
cited as: Butler
in para. 76

Cohen, David Understanding and Defending Past Practices


(2008)
Available at:
http://www.labornotes.org/2008/12/understanding-and-defending-
past-practices
cited as: Cohen
in para. 83

Farnsworth, Allan Commentary on Article 8in: Bianca-Bonell, Commentary on


International Sales Law
Milan (1987)
cited as: Farnsworth
in para. 60

Fitzgerald, John CISG, Specific Performance, and the Civil Law of Louisiana
and Quebec
in Journal of Law and Commerce (2008)
cited as: Fitzgerald
in para. 51

Fountoulakis, Christiana Remedies for breach of contract under the United Nations

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Convention on the International Sale of Goods, presented in


the ERA conference on International Commercial
Transactions, held on 10–11 June 2010 in Trier.
(2010)
cited as: Fountoulakis
in para. 46

Flectchner, M. Harry Funky Mussels, a Stolen Car, and Decrepit Used Shoes:
Non-Conforming Goods and Notice Thereof under the
the United Nations Sales Convention
in Boston University International Law Journal (2008)
Vol.6 No.1 P.8
cited as: Flectchner
in para. 77

Gabriel, Henry The Buyer’s Performance Under the CISG: Articles


53-60 Trends in the Decisions
in Journal of Law and Commerce (2005-06)
Available at:
https://www.uncitral.org/pdf/english/CISG25/Gabriel.pdf
cited as: Gabriel
in para. 41

Gu, Weixia Security for Costs in International Commercial Arbitration


in Journal of International Arbitration, Volume 22, Issue 3,
2005
cited as: Gu
in para. 4, 14

Holtzmann, Howard A Guide to the 2006 Amendments to the UNCITRAL Model


Neuhaus, et al. Law

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Alphen aan den Rijn (2015)


cited as: Holtzmann & Neuhaus
in para. 24, 36

Honnold, John Uniform Law for International Sales Under the 1980 United
Nations Convention, 3rd ed.
Berlin (1999)
cited as: Honnold
in para. 60, 68, 69

José Straube, Frederico The CAM-CCBC Arbitration Rules 2012: A Commentary


Finkelstein, Claudio The Hague (2016)
et al. cited as: Straube, et al.
in para. 29

Keller, Bertram Favor Contractus – Reading the CISG in Favor of the Contract
(2008)
Available at:
http://www.cisg.law.pace.edu/cisg/biblio/keller1.pdf
cited as: Keller
in para. 71

Lew, Julian Comparative International Commercial Arbitration


Mistelis, Loukas Alphen aan den Rijn (2003)
et al. cited as: Lew & Mistelis
in para. 31, 36

Lookofsky, Joseph M. The 1980 United Nations Convention on Contracts for the
International Sale of Goods
Copenhagen (2000)
cited as: Lookofsky

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in para. 41

Liu, Chengwei Changed Contract Circumstances


(2005)
Available at:
http://www.cisg.law.pace.edu/cisg/biblio/liu5.html
cited as: Liu
in para. 71

McLauchlan, David Contract Interpretation: What Is It About?


(2009)
Available at:
https://sydney.edu.au/law/slr/slr31/slr31_1/McLauchlan.pdf
cited as: McLauchlan
in para. 57, 67

Mittenthal, Richard Past Practice and the Administration of Collective Bargaining


Agreements
in Michigan Law Review 59(7), (1961)
cited as: Mittenthal
in para. 67, 83,

Miles, Wendy Security for costs in international arbitration – emerging


Speller, Duncan consensus or continuing difference?
in: The European Arbitration Review (2007)
cited as: Miles & Speller
in para. 14

Nicholas, Barry Article 78 in Bianca-Bonell Commentary on the International


Sales Law,
Milan (1987)

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cited as: Nicholas


in para. 72

N/A UNCITRAL Digest of Case Law on the United Nations


Convention on Contracts for the International Sale of Goods
(2016)
cited as: 2016 Digest
in para. 47, 76

N/A Guide to CISG Article 62


August 30, 2006
cited as: CISG Secretariat Commentary
in para. 51

N/A UNIDROIT Principles


(2010)
cited as: UNIDROIT 2010
in para. 50, 86

N/A Application for Security for Costs - Chartered Institute of


Arbitrators
Available at:
http://www.ciarb.org/docs/default-
source/ciarbdocuments/guidance-and-ethics/practice-guidelines-
protocols-and-rules/international-arbitration-guidelines-
2015/2015securityforcosts.pdf?sfvrsn=22
Cited as: Application for security for costs
in para. 11, 12,14

N/A Applications for Interim Measures- Chartered Institute of


Arbitrators

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Available at:
http://www.ciarb.org/docs/default-
source/ciarbdocuments/guidance-and-ethics/practice-guidelines-
protocols-and-rules/international-arbitration-guidelines-
2015/2015applicationinterimmeasures.pdf?sfvrsn=16
Cited as: Application for interim measures
in para. 6, 7

N/A Financial dictionary


Available at:
http://financial-dictionary.thefreedictionary.com/Bank+Charges
cited as: financial dictionary
in para. 80

Needham, Michael John Order for Security for a Party’s Costs


in Journal for Commercial International Arbitration (1997)
cited as: Needham
in para. 18

Park, William Non-Signatories and International Contracts: and Arbitrator's


Dilemma
Oxford, 2009
Available at:
http://www.arbitration-icca.org/media/4/80099054862031/me
dia012571271340940park_joining_non-signatories.pdf
Cited as: Park
in para. 30

Perillo, Joseph M. UNIDROIT Principles of International Commercial Contracts:


the Black Letter Text and Review
in 63 Fordham L. Rev. 281 (1994)

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cited as: Perillo


in para. 54, 62, 63

Pessey, Jean When to Grant Security for Costs in International Commercial


Arbitration: The Complex Quest for a Uniform Test.
in International Institute for Conflict Prevention and Resolution
(2011)
cited as: Pessey
in para. 7,8, 24, 26

Rubins, Noah In God We Trust, All Others Pay Cash: Security for Costs in
International Commercial Arbitration
in American Review of International Arbitration
Vol.1,2000
cited as: Rubins
in para. 21

Schlechtriem, Peter Uniform Sales Law - The UN-Convention on Contracts for


the International Sale of Goods
Vienna (1986)
cite as: Schlechtriem
in para. 76

Schwenzer, Ingeborg International Sales Law


2nd ed, Oxford and Portland, Oregon (2012)
cited as: Schwenzer
in para. 41

Speidel, Richard E. Restatement Second: Omitted Terms and Contract Method


in Cornell Law Review, Vol. 67, 1982
cited as: Speidel

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in para. 62

Tirado, Joe Security for Costs in International Arbitration


et al. in Yearbook on International Arbitration,Volume III, 2013
cited as: Tirado, et al.
in para. 17

Wright, James The Use of Hearsay in Arbitration (1992)


Available at:
http://naarb.org/proceedings/pdfs/1992-289.PDF
cited as: Wright
in para. 18

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INDEX OF CASES

Austria
Oberster Gerichtshof
10 November 1994
Case No. 2 Ob 547/93
Available at: http://cisgw3.law.pace.edu/cases/941110a3.html
cited as: Chinchilla furs case
in para. 68

Oberster Gerichtshof
13 April 2000
Case No. 2 Ob 100/00w
Available at: http://cisgw3.law.pace.edu/cases/000413a3.html
cited as: Machines Case
in para. 77

Oberster Gerichtshof
25 January 2006
Case No: 7 Ob 302/05w
Available at: http://cisgw3.law.pace.edu/cases/060125a3.html
cited as: Frozen Pork Liver Case
in para. 82

Oberster Gerichtshof
19 April 2007
Case No: 6 Ob 56/07i
Available at: http://cisgw3.law.pace.edu/cases/070419a3.html
cited as: Scaffold hooks Case
in para. 77

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Albania

Court of Appeal of Tirana


11 September 2014
Case No. 3072
Available at: http://www.uncitral.org/uncitral/en/case_law.html
cited as: Fuel Case
in para. 41

Belgium

Rechtbank van Koophandel Tongeren


25 March 2005
Case No.: A.R. A/04/01960
Available at: http://cisgw3.law.pace.edu/cases/050125b1.html
cited as: Scaforn International BV & Orion Metal BVBA v. Exma CPI SA
in para. 68

Finland

Turku Court of Appeal


12 April 2002
Case No.: Unavailable
Available at: http://cisgw3.law.pace.edu/cases/020412f5.html
cited as: Forestry Equipment Case
in para. 63

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France

Cour d’Appel Versailles


13 October 2005
Case No: CIV-2009-409-000363
Available at: http://cisgw3.law.pace.edu/cases/051013f1.html
cited as: Toys for infants Case
in para. 77

Germany

Bundesgerichtshof
8 March 1995
Case No.: VIII ZR 159/94
Available at: http://cisgw3.law.pace.edu/cases/950308g3.html
cited as: Mussels Case
in para. 77

Korea

Busan District Court


21 July 2011
Case No.: 1567
Available at: http://www.uncitral.org/uncitral/en/case_law.html
cited as: Clout 1567
in para. 61

Netherlands

International Court of Justice


25 September 1997

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At: http://www.icj-cij.org/docket/index.php?sum=483&p1=3&p2=3&case=92&p3=5
Cited as: Gabčíkovo-Nagymaros case
in para. 71

New Zealand

High Court of New Zealand


30 July 2010
Case No: CIV-2009-409-000363
Available at: http://cisgw3.law.pace.edu/cases/100730n6.html
cited as: Trucks Case
in para. 77

South Africa

Supreme Court of Appeal


19 September 1988
Case No.: Zasca 94
Available at:
http://www.saflii.org/za/cases/ZASCA/1988/94.html
cited as: Sasfin v Beukus
in para. 71

High Court of South Africa


27 March 2008
Case No.: Zakzhc
Available at:
http://www.saflii.org/za/cases/ZAKZHC/2008/22.html
cited as: High Court of South Africa
in para. 71

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Spain

Appellate Court Valencia


8 April 2008
Case No. Recurso de Apelación No. 908/2007
At: http://cisgw3.law.pace.edu/cases/080408s4.html
Cited as: Extruding machine case
in para. 72

Valencia Provincial High Court


8 April 2008
Case No. 1038
Available at: http://www.uncitral.org/uncitral/en/case_law.html
cited as: Single-screw Extruder Case
in para. 41

Switzerland

Bundesgericht
17 August 1995
Case No.: not available
Available at:
http://www.kluwerarbitration.com/CommonUI/document.aspx?id=kli-ka-1027645-n
cited as: Vekoma BV v. Maran Coal Corporation
in para. 35

Cantonal Court of the Canton of Valais


27 April 2007
Case No. 934
Available at: http://www.uncitral.org/uncitral/en/case_law.html
cited as: Cooking Accessories Case

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in para. 41

Ukraine
The Commercial Court of Donetsk Region
13 April 2007
Case No. 1406
Available at: hhtp://www.unicitral.org/uncitral/en/case_law.html
Cited as: Automatic Crucible press case
In para. 41

United Kingdom

High Court
Wholecrop Marketing Ltd v Wolds Produce Ltd
16 July 2013
Available at:
http://uk.practicallaw.com/D-022-2847?source=relatedcontent
cited as: Wholecrop Marketing Ltd v Wolds Produce Ltd
in para. 35

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INDEX OF ARBITRAL AWARD

International Centre for Settlement of Investment Disputes

ICSID Case No. ARB/12/10


13 August 2014
cited as: ICSID No. ARB/12/10
in para. 23

International Court of Arbitration


ICC Case No. 7155
1933
Available at:
cited as: ICC Case No 7155
in para. 30

ICC Case No. 8611


23 January 1997
Available at:
http://cisgw3.law.pace.edu/cases/978611i1.html
cited as: Industrial Equipment Case
in para. 69

ICC Case No. 8817


December 1997
Available at:
http://cisgw3.law.pace.edu/cases/978817i1.html
cited as: Food products case
in para. 66

ICC Procedural Order No. 3

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4 July 2008
Available at:
28 ASA Bull. (2010)
cited as: ICC/8Jul2008
in para. 20

ICC Case No. 8324


1995
Available at:
http://cisgw3.law.pace.edu/cases/958324i1.html
cited as: Magnesium case
in para. 58

Serbian Chamber of Commerce

Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce


5 January 2009
Case No. T-5/08
Available at:
http://cisgw3.law.pace.edu/cases/090105sb.html
cited as: Paper handkerchiefs case
In para: 52

Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce


28 January 2009
Case No. T-8/08
Available at:
http://cisgw3.law.pace.edu/cases/090128sb.html
cited as: Medicaments Case
In para: 52

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The International Commercial Arbitration Court

Tribunal of International Commercial Arbitration at the Russian Federation Chamber of


Commerce and Industry
17 October 1995
Case No. 123/1992
http://cisgw3.law.pace.edu/cases/951017r1.html
cited as: Equipment Case
in para. 79

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STATEMENT OF FACTS

The Parties to this arbitration are Wright Ltd (hereafter ‘CLAIMANT’) and SantosD KG (hereafter
‘RESPONDENT’).
CLAIMANT is a highly specialized manufacturer of fan-blades for jet engines incorporated in
Equatoriana.
RESPONDENT is a medium sized manufacturer of jet engines based in Mediterraneo.
Both Parties were subsidiaries of Engineering International SA until 2010, when Claimant was
sold to Wright Holding PLC, and Respondent was sold to SpeedRun, as consequence of a financial
restructuring.
10 November 2009 CLAIMANT and RESPONDENT (hereafter ‘the Parties’)
representatives attended a meeting held at the premises of
Engineering International where was decided that RESPONDENT
should have been de-risked by setting fixed exchange rates in its
existing and new contracts in order to become more attractive for
potential buyers.
January 2010 RESPONDENT received a notice from Earhart SP regarding the
company’s plans to produce a new line of executive jet and the
request of quotations for the engines.
Spring 2010 RESPONDENT contacted CLAIMANT to discuss the joint development
of a new fan blade to be included into RESPONDENT’s new engine
requested by Earhart SP.
May 2010 Ms. Celia Fang, RESPONDENT’s development manager, and Ms.
Maryam Filmas, CLAIMANT’s production engineer, agreed on the
basic principles for the cooperation of the Parties. Ms. Fang clarified
that the Parties should agree on a certain price to be used as the basis
for a price offer to Earhart, whereas Ms. Filmas insisted on the
impossibility of fixing a price in the early stage of negotiation.
1 August 2010 The Parties concluded the Development and Sales Agreement
(hereafter ‘DSA’) for the joint development of a new version of
CLAIMANT’s fan blade (TRF 192-I). Under the DSA RESPONDENT

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undertook to purchase a minimum of 2,000 fan blades and insisted


on a price in US$. The Parties agreed upon a purchase price per
blade ranging from US$ 9,975 to US$ 13,125 depending on a cost
estimate per blade.
22 October 2010 RESPONDENT agreed to buy 2,000 clamps produced and delivered by
CLAIMANT. CLAIMANT agreed to RESPONDENT’s proposal of having
a fixed exchange rate governing the whole contract.
26 October 2010 The Parties signed an addendum to regulate their agreement on the
fixed exchange rate and the purchase of the clamps.
15 January 2015 RESPONDENT transferred the full purchase price as invoiced by
CLAIMANT at the Equatoriana National Bank (hereafter ‘EQB’).
CLAIMANT claimed the outstanding amount for the purchase price of
the fan blades and the reimbursement of the inspection fees deducted
by the EQB to be paid by RESPONDENT.
February 2015 Negotiations regarding the claimed additional amounts starts
between the Parties.
1 April 2016 CLAIMANT declared the failure of negotiations.
31 May 2016 CLAIMANT submitted a defective Request for Arbitration with
invalid Power of Attorney (hereafter ‘POA.1’) and incorrect
Registration Fee paid.
7 June 2016 RESPONDENT received CLAIMANT’s Request for Arbitration from
Center for Arbitration and Mediation of the Chamber of Commerce
Brazil-Canada (hereafter ‘CAM-CCBC’).
24 June 2016 RESPONDENT submitted its answer to CLAIMANT’S Request for
Arbitration.
6 September 2016 RESPONDENT requested an order for security for costs (hereafter
‘SFC’)

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INTRODUCTION

1 The longstanding business relationship between the Parties, which began in 2003, finally
culminated in the signature of the DSA for the joint development of the revolutionary TRF 192-1
fan blade in 2010. At a certain point, no matter that RESPONDENT has fulfilled all its obligations
under the DSA, CLAIMANT started unjustifiably claiming additional payments, alleging that the
purchase price paid was wrong due to an irresponsible mistake in its calculations and that the
inspection fees deducted by the EQB should be borne by RESPONDENT. However, as a matter of
facts RESPONDENT honored all its obligation in the name of the good faith, fundamental principle
on which the CISG is based, whereas CLAIMANT is stubbornly accusing RESPONDENT of having
taken advantage of such alleged error. Following the conclusion of the DSA, the Parties signed an
Addendum to the contract, agreeing on the purchase of 2,000 clamps and on the application of the
fixed exchange rate, as the Parties had already intended to apply a fixed exchange rate to the whole
contract but forgot to regulate the matter in their initial agreement. After the delivery of the goods
by CLAIMANT, RESPONDENT relied on the attached invoice and paid the full amount invoiced.
Disappointingly, CLAIMANT unreasonably claimed that, as consequence of a mere a mistake in
calculation, a balance of US$ 2,285,240 was outstanding, and requested the reimbursement of US$
102,192.80 deducted by EQB as inspection fees. RESPONDENT emphasized in such regard that the
invoice reflects the accurate contractual agreement of the Parties and that CLAIMANT has not right
to receive any further payments. In response, CLAIMANT declared the failure of negotiations and
initiated arbitration proceedings against RESPONDENT raising neither admissible nor justified
claims.
2 Since it is evident that CLAIMANT is facing a serious financial crisis, RESPONDENT respectfully
requests the Tribunal to order CLAIMANT to provide security for the costs that RESPONDENT is
likely to incur in the arbitral proceedings (ISSUE 1). Moreover, CLAIMANT’S claims must be
dismissed as inadmissible since the request for arbitration submitted by CLAIMANT is belated
(ISSUE 2). Finally, CLAIMANT is not entitled to the additional payment of $2,285,240 for the fan
blades (ISSUE 3), neither to the reimbursement of the inspection fees deducted by the EQB as
RESPONDENT cannot bear the burden of knowing all the public laws and regulations enforced only
in Equatoriana, but not applicable in Mediterraneo (ISSUE 4).

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ARGUMENT

ISSUE 1: THE TRIBUNAL SHOULD GRANT RESPONDENT’S REQUEST FOR


SECURITY FOR COSTS
3 RESPONDENT requests the Tribunal to order CLAIMANT to provide security for the costs it is likely
to incur in this arbitration that will amount to a minimum of US$ 200,000. The security should
cover the costs RESPONDENT must pay to the Tribunal and the legal costs for the services of its
attorney and expenses for the oral hearing, for witnesses and experts. Contrary to C LAIMANT’s
allegations, RESPONDENT’S request for security is built on solid foundations and authentic facts,
which justify this request. Indeed, the Tribunal has the authority to order SFC and it should exercise
such authority that is derived from the lex arbitri to order CLAIMANT to post security for
RESPONDENT’S costs (A). Furthermore, an order for SFC is indispensable in this case as there is a
substantial risk that CLAIMANT will not enforce the final award due to its serious financial crisis
(B). Finally, given the present situation, refusal of awarding RESPONDENT with security for its
costs is a violation of the principle of due process (C).
A. The Tribunal Should Exercise its Power and Order CLAIMANT to Provide Security for
Costs
4 Although CLAIMANT has denied the Tribunal’s authority to order SFC in the first instant and
admitted it later [CL Memo, Pg. 10,14], RESPONDENT insists that it has full legitimate grounds for
its request for SFC. The Tribunal's unfettered discretionary power to order SFC must be exercised
basing upon all the factual circumstances of the case. In contrast to court proceedings, where the
judge must decide whether he has jurisdiction to order security by virtue of law, and if so, how to
exercise his discretion in accordance with case law, the arbitral tribunal is not bound by such
procedures and has a totally flexible jurisdiction in deciding SFC and which factors to take into
consideration to order such measure [Gu].
I. The Authority of the Tribunal to Order Security for Costs Derives from the Lex Arbitri
5 The Tribunal derives its power to grant SFC from the lex arbitri represented by the CAM-CCBC
rules and the UML, which the Parties agreed earlier to govern the conduct of their arbitral
proceedings. The lex arbitri grants the Tribunal the discretionary power to order SFC, and the
Tribunal should make use of such power in the case at hand.

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1. The CAM-CCBC Rules Grant the Tribunal the Authority to Order Security for Costs
6 The Tribunal has the authority to order CLAIMANT to post security for RESPONDENT’s costs
according to Art. 8.1 CAM-CCBC Rules which states that “Unless the parties have otherwise
agreed, the Arbitral Tribunal can grant provisional measures, both injunctive and anticipatory,
that can, at the discretion of the Arbitral Tribunal, be subject to the provision of guarantees by the
requesting party”. Accordingly, the Tribunal has the authority to grant the requesting party SFC
as the reference to ‘provisional measures, both injunctive and anticipatory’ signifies that arbitral
tribunals under the CAM-CCBC Rules have broad powers to order interim measures including
SFC. Therefore, the application of the CAM-CCBC Rules reflects the Parties’ intention for the
application for SFC as there is no prohibition under the arbitration agreement, including the
applicable arbitration rules [Application for interim measures].
2. The UNCITRAL Model Law Entrusts the Tribunal with the Power to Order Security for
Costs
7 The UML entrusts the Tribunal with the power to order SFC as it empowers tribunals to order
interim measures such as SFC although it is not mentioned explicitly in the UML [Pessey]. Art.
17(1) UML states that “Unless otherwise agreed by the parties, the arbitral tribunal may, at the
request of a party, grant interim measures”. Therefore, as there is no prohibition under the
arbitration agreement, and lex arbitri, “arbitrators may conclude that they have an implied power
to do so” [Application for Interim Measures]. The Tribunal has the power to order SFC in
accordance with Art. 17 UML, which “rests on the premise that international arbitral tribunals
have the authority to order provisional measures” [Born].
a. RESPONDENT Met the Test for Obtaining Security for Costs under the UNCITRAL Model
Law and the International Arbitration Practices
8 Where there is no unified international test that should be applied to assess the availability of
reasonable grounds that the party requesting SFC is basing upon [Pessey], RESPONDENT has
successfully met the different criteria that are widely accepted by tribunals - the UML and the
International Arbitration Practice.
9 On the one hand, Art. 17A(1) UML sets two requirements in order that an interim measure is
granted which are “(a) Harm not adequately reparable by an award of damages is likely to result
if the measure is not ordered, and such harm substantially outweighs the harm that is likely to
result to the party against whom the measure is directed if the measure is granted; and (b) There

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is a reasonable possibility that the requesting party will succeed on the merits of the claim. The
determination on this possibility shall not affect the discretion of the arbitral tribunal in making
any subsequent determination”. RESPONDENT fulfilled the test specified in Art. 17(1) and therefore
it met the law requirements for obtaining SFC.
10 Indeed, RESPONDENT will encounter “a material risk of serious damage” if SFC is not granted
[Born]. RESPONDENT is under the probability of facing financial damages resulting from this
arbitration as it must bear the burden of legal costs as a consequence of C LAIMANT’S initiation of
arbitral proceedings even though RESPONDENT had fulfilled its obligations under the DSA.
Therefore, RESPONDENT needs to ensure that it will be able recover the costs resulting from this
arbitration where CLAIMANT has precedent in non-compliance with awards [R, Pg 47, Exh R6].
Moreover, RESPONDENT has performed all the obligations arising out of the DSA. Consequently,
it is foreseeable that CLAIMANT will not succeed on the merits of the case.
11 On the other hand, RESPONDENT met the criteria set out in the International Arbitration Practice
Guideline. The guideline requires the Tribunal, when deciding whether to make an order for SFC,
to take into account the following matters:” i) the prospects of success of the claim(s) and
defense(s); ii) the claimant’s ability to satisfy an adverse costs award and the availability of the
claimant’s assets for enforcement of an adverse costs award; and iii) whether it is fair in all of the
circumstances to require one party to provide security for the other party’s costs” [Application
for security for costs].
12 In this regard it has firstly to be noted that RESPONDENT requests SFC in good faith since it needs
to secure the costs it will incur in this arbitration. The arbitrators “should limit their preliminary
examination to determine whether there is a prima facie claim made in good faith and a prima
facie defense made in good faith” [Application for security for costs]. Secondly, the guideline
establishes that if there is serious risk of inability to pay which will be outlined in the upcoming
argument as CLAIMANT is insolvent then RESPONDENT should be awarded SFC in order to
safeguard RESPONDENT. Thirdly, it is fair to grant RESPONDENT SFC as RESPONDENT has
immediately paid the invoiced amount sent by CLAIMANT which reflects the good conduct of
RESPONDENT. Therefore, as the Tribunal should “consider the conduct of the party applying for
security both before and during the course of the arbitration” [Application for security for costs]
it should consider the good faith and fulfillment of RESPONDENT’s obligations. Consequently, as

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RESPONDENT has met all the different tests set to obtain SFC, RESPONDENT shall be granted its
request.
II. The Parties Agreement on Security for Costs is Unessential
13 Art. 17(1) UML states that, “Unless otherwise agreed by the parties”, the arbitral tribunal may,
at the request of a party, grant interim measures. The provision denotes that the arbitrators enjoy
unrestricted power to order specified interim measures by default, and only an express agreement
to the contrary could dispossess the tribunal of such power [Born]. Since it is by now well-
established practice that a request for security for costs is considered as a form of an application
for a provisional or conservatory measure [Berger], the foregoing principle applies. Hence, Art.
17 presuppose that the power of the arbitral tribunal to order interim measures is always implied
in arbitration agreements governed by the model law “unless” otherwise specified. That conclusion
is supported by the almost universal approach of national arbitration legislation, which is to
provide the arbitral tribunals the power to order provisional relief “unless otherwise agreed,”
acknowledging the Party's’ presumptive intention to permit arbitrators to order SFC [Born].
Consequently, whether the Parties have explicitly agreed to grant the Tribunal the authority to
order SFC or not is not an essential factor, as what decides the question of authority here is whether
the Parties have agreed expressly in the arbitration agreement or the terms of reference to not
authorize the Tribunal to order SFC. Provided that no such specific agreement to deprive the
arbitrators of the power to order provisional measures has been concluded, and CLAIMANT did not
prove the contrary, the authority of the Tribunal to order SFC is established by the Parties implied
agreement.
III. Ordering Security for Costs is Widely Accepted in International Arbitration Practice
14 It cannot be disputed that, in an appropriate case, an order for security for costs can serve the
interests of justice. It is for this reason, as recognized by world arbitration practice, that both
national arbitration laws and many arbitral institution rules contain provisions, in more or less
specific terms, empowering arbitrators to do so [Gu]. In common law jurisdictions ordering SFC
is explicitly mentioned as in the English Arbitration Act 1996 section 38(3) “The tribunal may
order a claimant to provide security for the costs of the arbitration”. Additionally, civil law
jurisdictions “do give arbitrators broad powers to order any interim measure that they deem
necessary and/or appropriate” [Application for Security for Costs]. Therefore, SFC is accepted in
both legal systems. Moreover, the LCIA one of the prestigious arbitral institutions has granted the

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tribunal the power to provide SFC upon the application of one of the parties [LCIA rules, Art 25.2].
The ICC rules has implicitly been interpreted, “empowering an arbitral tribunal to grant an order
for security for costs in appropriate circumstances” [Miles and Speller].
15 Therefore, CLAIMANT should be ordered to provide SFC as the Parties has agreed explicitly that
arbitration proceedings should be “in line with international arbitration practice” [R., Pg. 11, Exh.
C2] and ordering SFC is accepted in international arbitration practice.
B. An Order for Security for Costs is Indispensable as there is a Substantial Risk that
CLAIMANT will not Comply with an Award for Costs
16 The Tribunal should grant RESPONDENT SFC, as there is a clear risk that CLAIMANT will not
comply with its obligation to pay an award for costs. CLAIMANT argues that there are no special
circumstances that entitle RESPONDENT with the right to be granted with SFC [CL Memo, Pg. 15].
However, where SFC may be ordered, the Tribunal must take into consideration three elements;
the financial condition of CLAIMANT, the extent to which CLAIMANT is relying on third parties
funding to participate in the arbitration, and the likely difficulties in enforcing a final costs award
[Born]. As the three elements are all satisfied, SFC became inescapable to secure RESPONDENT’s
rights.
I. CLAIMANT Has Serious Financial Difficulties which Justify an Order for Security
17 CLAIMANT is facing significant financial crisis that strongly supports an order for SFC, which
would preserve RESPONDENT’s right to recover its costs in the light of CLAIMANT’S inability to
meet a final award for costs. It is widely recognized that the financial situation of the claimant is
the most obvious and most often applied criterion by tribunals to determine whether to make an
order for security since the payment of a sum of money is the core of such order [Tirado, et al.].
CLAIMANT’S financial situation has deteriorated fundamentally and unexpectedly in the period
between the conclusion of the DSA in 2010 and the initiation of those proceedings according to
CLAIMANT’S financial statements [R., Pg.58, PO.2 Para. 28]. The statement shows that the
available cash flow of CLAIMANT has dramatically decreased from US$ 10.856.000 in 2010 to only
US$ 199.950 in 2015. This reveals that CLAIMANT is practically insolvent, as the available liquid
assets do barely cover the amount required by RESPONDENT for security. CLAIMANT has concealed
important financial information from RESPONDENT by creating a false impression that C LAIMANT
is expecting to receive an arbitral award of at least US$ 100 million while in fact it received only
US$ 15 million [R. Pg.46]. CLAIMANT is under the Obligation to inform RESPONDENT about the

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outcome of the arbitration since the UNCITRAL rules on transparency as a general practice require
that awards should be made available to the general public according to Art. 2 of the rules.
18 Moreover, CLAIMANT’S full dependence on third parties’ funding in previous arbitrations besides
the current one demonstrates its inability to afford an award for costs. The article which
RESPONDENT has presented from the reputable Carioca Business News reports that CLAIMANT
relied on a loan granted by “Finance You” which is a third party funder for investment claims to
finance previous two arbitral proceedings with the government of Xanadu [R., Pg.47, R., Exh 6].
CLAIMANT alleges that the article that RESPONDENT has provided as a support for its claims should
not be taken into consideration according to the hearsay rule [CL Memo, Pg. 15]. “A general rule
which excludes hearsay evidence, however, may eliminate highly relevant and reliable items of
evidence. Once the hearsay evidence is forced upon the arbitrator, an analysis of its relative worth
must be made, and each item must be tested for its relevancy and reliability” [Wright]. Yet, the
article provided by RESPONDENT is a “credible testimony” [Needham]. Furthermore, CLAIMANT
admitted that it has approached two third party funder to finance this arbitration but both rejected
its request, and in the end, it used liquidity provided by Wright Holding PLC under a parent
company loan of US$ 3,000,000 granted to CLAIMANT in December 2015 to provide the necessary
liquidity for the final stages of production of the TRF‐305 fan [R,. Pg. 59, PO2, Para. 29].
19 While the mere existence of a third-party funding may not be a sufficient reason to order SFC,
CLAIMANT resorting to a parent company loan dedicated to fund another project in order to finance
this arbitration, while in the meantime the financial statements shows that the total amount of
liabilities incurred by CLAIMANT in 2015 is US$ 37.532.950 proves its lack of any available
financial means and indicates that CLAIMANT is on the edge of insolvency. Hence, where
CLAIMANT appears to lack the assets that could satisfy a final award for costs, but is pursuing its
claims in the arbitration with a loan from a third party, then a strong prima facie case for SFC
exists [Born].
20 SFC was granted in the context of a claimant with a balance sheet showing over-indebtedness and
practically no liquid assets. The arbitral tribunal justified its decision as follows: “If a party has
become manifestly insolvent and therefore is likely relying on funds from third parties in order to
finance its own costs of the arbitration, the right to have access to arbitral justice can only be
granted under the condition that those third parties are also ready and willing to secure the other
party's reasonable costs to be incurred” [ICC/8Jul2008]. Consequently, RESPONDENT must be

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granted with SFC, as it is entitled with the right to secure payment of a potential adverse costs
award against the impecunious CLAIMANT.
II. RESPONDENT Will Face Obstacles in Enforcing a Potential Award for Costs
21 Even if RESPONDENT prevailed and is awarded recovery of its costs, such award will be merely
symbolic if RESPONDENT is unable to enforce it when CLAIMANT transfers its assets to a safe haven
or declares its insolvency. SFC is therefore essential to provide effective, enforceable arbitral
justice [Rubins]. CLAIMANT’S financial status [R., Pg. 59, PO.2, Para. 28] indicates that it would
be difficult to enforce an award against it, as it has no liquid assets that Equatorianian courts can
execute an award for costs on, and obtaining a decision from the court to liquidate C LAIMANT’S
assets would not be a simple procedure to RESPONDENT.
22 Furthermore, on the 2nd of September 2016, the Head of the Chamber of Commerce in Oceanside,
Equatoriana confirmed the news about CLAIMANT’s non-compliance with another award issued by
a tribunal acting under the CAM‐CCBC Rules in January 2016 which ordered CLAIMANT to pay
an amount of US$ 2,500,000 to one of its suppliers. CLAIMANT disclosed that it is currently
attempting to set-off such award [R., Pg.59, PO2] alleging that the supplier is not entitled with the
amount since it owes a larger amount to its parent company as a compensation for damages of
delivery of nonconforming goods without providing any proof that confirms its allegations [R.,
Pg. 49]. Such information raises concerns about CLAIMANT’S willingness to pay a final award for
costs to RESPONDENT as it may challenge the award basing on any ground when enforcement is
sought in Equatorianian courts since it did so with the its supplier.
23 Thus, the Tribunal must protect RESPONDENT’s interests by ordering CLAIMANT to provide SFC as
in the case of RSM Production Corp. v. Santa Lucia, where the tribunal awarded security for costs
to the respondent on the grounds that the claimant was a ‘repeat offender’ who had failed to pay
arbitration past award. The tribunal also referred to the fact that claimant was relying on third party
funding to finance its case [ICSID No. ARB/12/10].
C. Not Awarding RESPONDENT with Security for its Costs Violates the Principle of Due
Process
24 Article 18 UML stipulates that “The parties shall be treated with equality and each party shall be
given a full opportunity of presenting his case”. The provision sets the equal treatment of the
parties as a core principal in any arbitration, thus it lays a mandatory requirement that the tribunal
cannot violate [Holtzmann & Neuhaus]. Given the fact of the deteriorated financial situation of

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CLAIMANT, an order of security in this arbitration serves as an assurance of the equal treatment of
the Parties. SFC is an important safeguard for RESPONDENT who is at risk of sustaining losses
regardless of the outcome of the arbitration. Indeed, RESPONDENT who by definition did not initiate
the proceedings, is forced to incur costs and mount a defense, regardless of the merits of the claims
and of CLAIMANT’S ability to cover RESPONDENT’s costs if the claims are dismissed [Pessy].
Consequently, not awarding RESPONDENT with SFC hinders the principle of due process, as
proceeding with the arbitration without providing an assurance of financial compensation to
RESPONDENT in the form of an order for SFC is highly unfair.
I. RESPONDENT Fulfilled all its Contractual Obligations Under the Development and Sales
Agreement
25 In contrast with CLAIMANT’S assumption [CL Memo, Pg.11, Para. 23], once RESPONDENT has
received the invoices sent by CLAIMANT’S accounting department, it paid the full amount as
invoiced for the fan blades and clamps, and by doing so, RESPONDENT fulfilled all its contractual
obligations under the DSA [R. Pg.12, Exh.C3]. However, CLAIMANT is unjustifiably claiming its
entitlement to additional amounts, which the Parties did not agree on under the DSA. Furthermore,
CLAIMANT is alleging that RESPONDENT is the reason behind its financial difficulties by not paying
the claimed outstanding amount of the fan blades and clamps. However, since RESPONDENT
fulfilled its entire obligation under the DSA as forgoing stated, it is under no obligation to bear
CLAIMANT’S internal financial issues.
II. Ordering Security for Costs Does Not Constitute a Prejudgment on the Merits of the Case
26 Ordering CLAIMANT to provide SFC does not constitute a prejudgment on the merits of the case
since RESPONDENT needs to ensure and secure its potential rights to recover its costs against
CLAIMANT who is going through serious financial difficulties. Regardless the outcome of the
Arbitration, SFC is a protection to ensure that RESPONDENT is not placed in a situation where it
would sustain loss. “However, a full review of the merits of the claims before ordering SFC would
be inconsistent with the very nature of such measures which is providing protection at an early
stage (i.e. before full examination of the evidence)” [Pessey]. In any case the interpretation of such
interim measure in its nature does not constitute a predetermination or prejudgment of the final
award, it’s the parties right in case of serious and urgent situation to secure itself that it would not
sustain any loss in case of prevailing in the case. RESPONDENT’s request for SFC has been placed
as a consequence of CLAIMANT’S financial instability, which makes RESPONDENT concerned about

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its ability to recover its expenses in case of winning. Thus, ordering SFC will not constitute a
prejudgment on the merits of the case, it is just a way of securing and protecting RESPONDENT’S
right due to the fact that CLAIMANT is facing serious financial difficulties.

CONCLUSION OF THE FIRST ISSUE


27 Based on the above submissions, The Tribunal has a discretionary power to order SFC and such
power must be exercised to order CLAIMANT to post security for RESPONDENT’s costs. Provided
that there are sufficient serious reasons, which entail RESPONDENT to believe that awarding
security is indispensable in this case, not granting RESPONDENT’s request would be a violation of
the principle of due process.

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ISSUE 2: THE TRIBUNAL SHOULD DISMISS CLAIMANT’S REQUEST AS


BELATED AND THEREFORE INADMISSIBLE
28 Section 21 DSA provides that “the arbitral proceedings should be initiated within 60 days after
the failure of the negotiation”. The Request for Arbitration submitted by CLAIMANT on 31 May
2016 did not comply with the requirements set in Art. 4.1 and 4.2 of CAM-CCBC Rules. Neither
had CLAIMANT paid the Registration Fee in full, nor had it submitted a valid POA.1 for the
arbitration (A). Consequently, the arbitration proceedings were only commenced on 7 June 2016
after the POA.2 was provided and the fee had been paid in full. Thus, the request is delayed
according to Section 21 DSA and the lex arbitri (B).
A. CLAIMANT’S Request and Supporting Documents Did Not Satisfy the Criteria Set Out in
Art. 4.1 and 4.2 CAM-CCBC Rules
29 The request submitted by CLAIMANT to the administration of CAM-CCBC did not satisfy the
requirements set out in both Art. 4.1 and 4.2 of CAM-CCBC Rules. Art. 4.1 sets certain
requirements for the initiation of arbitration. Such requirements are: providing the arbitration
agreement, providing for choice of the CAM-CCBC to administer the proceedings, providing the
Power of Attorney, a Statement of the matter of the Subject of Arbitration, estimated amount in
dispute, full name and details of the parties, the seat, language, law or rules of law applicable to
the arbitration. The POA.1 that CLAIMANT has submitted on the 31st of May was invalid as it
was signed by Wright Holding Plc, the parent company of Wright Ltd, and not by CLAIMANT
itself [R., Pg. 18, Exh. C8]. Moreover, under Art. 4.2, CLAIMANT must attach a proof of payment
of the registration fee to the notice that is to be sent to the President of the CAM-CCBC. Payment
of the registration fee must be made in accordance with Art. 12.5 of the rules and the table of
expenses [Straube et al.]. However, CLAIMANT failed to meet some of its obligations, namely the
power of attorney and the payment of the full registration fee [R., Pg. 19, Exh. C8].
I. The First Power of Attorney Submitted by CLAIMANT is Invalid
30 The POA.1 submitted by CLAIMANT is invalid as it was rejected by the CAM-CCBC and
CLAIMANT was requested to submit a new one. CLAIMANT has submitted a POA signed by Wright
Holding PLC, which is a non-signatory to the arbitration agreement. Accordingly, the arbitration
agreement and the right to raise claims does not extend to Wright Holding PLC as it does not meet
the most common requirements to adjoin the non-signatory to arbitration. The most common
scenarios are: “non-signatory participation in contract formation sometimes linked to confusion

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created by mention of the non-signatory in contract documents” and “implied or express


acceptance of the arbitration agreement by the non-signatory, whether in the particular
arbitration itself or in another forum” [Park]. Wright Holding PLC did not participate in the
formation of the contract. Moreover, there is no implied or express acceptance of the arbitration
agreement by Wright Holding PLC. Consequently, Wright Holding cannot arbitrate or initiate
proceedings in place of Wright Ltd as in the [ICC Case No. 7155] when the tribunal refused to
extend the arbitration agreement to the parent company even though it owned 99% of the shares
of the company “because of the absence of involvement at the time the contract was concluded”.
This rule is also applicable to Wright PLC for the reasons mentioned previously, even if Wright
PLC holds 88% of the shares [R., Pg. 54, PO2 Para. 2]. Therefore, the first POA submitted by
CLAIMANT is invalid as Wright Holding PLC is a non-signatory to DSA nor the arbitration
agreement and it cannot raise claims.
II. The Error in the Registration Fee Paid by CLAIMANT is a Substantial Error
31 The payment of the amount of R$ 400.00 instead of R$ 4,000.00 is a substantial error which proves
CLAIMANT’S irresponsibility by keeping to repeat such reckless mistakes frequently. The
outstanding amount was only paid on 7 June 2016 as it took CLAIMANT seven days to rectify the
mistake while it did not need all of this time if it was a simple error as it is claiming. In such a case
where the failure to comply with the mandatory requirements of the arbitral institution such as the
payment of the registration fee in full is not remedied before the time limitation expires, it should
be considered that the arbitration was not validly commenced before the expiry of the time limit
and therefore the claims are barred [Lew & Mistelis].
B. CLAIMANT Did Not Initiate the Arbitral Proceedings in Accordance with Section 21 of
the Development and Sales Agreement nor the Lex Arbitri
32 The Parties have set rules governing the arbitration and added a clause specifying the conditions a
party who is willing to initiate an arbitration must meet in Section 21 DSA [R., Pg. 11, Exh. C2].
Since the dies a quo for initiating arbitration specified is sixty days after the failure of negotiations,
CLAIMANT’S request was submitted out of time. The negotiations between the Parties failed on the
1st of April, therefore, the deadline for submitting any request is 31st of May 2016. Hence,
CLAIMANT’S claims are inadmissible as the proceedings were not commenced in conformity with
the DSA nor the UML.

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C. The Dies a Quo for Initiating Arbitration Agreed in the Development and Sales
Agreement is Sixty Days after the Failure of Negotiations
33 According to Section 21 DSA the time limit for initiating arbitration is within sixty days from the
failure of negotiations [R., Pg. 11, Exh. C2,]. Where the negotiations failed in the 1st of April 2016,
initiating the arbitration on the 7th of June 2016 entails the Tribunal to dismiss CLAIMANT’S Claims
as invalid for being submitted out of time.
I. Negotiations Failed on the 1st of April 2016, Therefore CLAIMANT Request was Overdue
34 Negotiations failed on the 1st of April 2016 and CLAIMANT did not prove the opposite. The email
that was received by RESPONDENT from CLAIMANT on the 1st of April 2016 proves that the
negotiation were closed on that particular date, as C LAIMANT announced that it will take the
necessary steps to initiate an arbitration proceedings [R., Pg.29, Exh. R3]. CLAIMANT stated in its
email “the outcome of yesterday’s meeting shows that it is presently not possible to find an
amicable solution. Consequently, we have instructed our lawyer to take the necessary steps to
initiate arbitration proceedings against you” and any reasonable person reading such statement
would interpret it as a clear declaration of the failure of negotiations between the Parties and a
movement toward a further step of the dispute resolution process. Therefore, since the dies a quo
to submit any request for arbitration is within sixty days after the failure of negotiations, the
deadline for submitting the request for arbitration is the 31st of May 2016. However, C LAIMANT
did not comply with the requirement of Art. 4.1 And 4.2 CAM-CCBC rules as it had not paid the
registration fee in full nor had it submitted a valid power of attorney, thus CLAIMANT request was
seven days late as it was submitted on 7 June 2016. CLAIMANT claims that it has ten more days to
submit the correct documents under Art. 4.7 of the CAM-CCBC rules which states that “the
answers to the Questionnaires and any material facts will be sent to the Parties, after which they
will have ten (10) days to submit comments” [CL Memo, Pg. 15]. Unfortunately, the article is
obviously irrelevant to what CLAIMANT is claiming, as it is clearly concerned with the period that
the Parties have to submit their comments on the answers of the questionnaires and the materials,
and definitely not a period to provide correct documents rather than the defected document that
they have already submitted.
35 In a case before the Swiss Federal Tribunal, the arbitration clause contained a time limit running
thirty days from the time it was agreed that negotiations were unsuccessful. A dispute arose
between the parties, after some negotiations the claimant sent a letter to the respondent

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substantiating its claims and setting a deadline by which respondent should have settled the claims.
In the event of failure to do so the initiation of arbitration proceedings was threatened. Though the
respondent did not reply within the deadline mentioned in that letter, no immediate action was
taken. Rather the claimant waited three months after the expiry of the deadline before a reminder
of the outstanding claim was sent. Upon reply that no obligations were outstanding, claimant
started arbitration proceedings. Contrary to the finding of the arbitrator in an action for the
annulment of the award the Swiss court considered the set deadline to be the relevant date for
starting the time limit irrespective of whether the other party answers or not, or the party makes
another offer later [Vekoma BV v Maran Coal Corporation]. Therefore, as it was also held in
[Wholecrop Marketing Ltd v Wolds Produce Ltd] that the time bar to commence arbitration is an
absolute contractual limit for initiating proceedings, CLAIMANT’S claims should be rejected as
submitted out of the agreed time bar.
II. CLAIMANT’S Request is Belated Under Art. 21 of UNCITRAL Model Law
36 According to Art. 21 UML “Unless otherwise agreed by the parties, the arbitral proceedings in
respect of a particular dispute commence on the date on which a request for that dispute to be
referred to arbitration is received by the respondent”. The Parties are free to address the problem
of defining the point in time when the limitation period for bringing a legal action is considered to
have been interrupted by the commencement of arbitral proceedings. The Model Law leaves the
manner of commencing arbitration to the agreement of the parties and the arbitral rules selected in
the arbitration agreement as an initial matter [Holtzmann & Neuhaus]. Where the Parties did not
address such issue of commencement in their agreement, nor was it mentioned in the CAM-CCBC
rules, the manner required for the initiation of the proceedings should be governed by Art. 21
UML. The term “received” in Art. 21 is defined by Art. 3(b), which provides that “the
communication is deemed to have been received on the day it is so delivered”. CLAIMANT may
argue that is had notified RESPONDENT about referring the dispute to arbitration in its email of 1st
April 2016. However, Art. 21 was specific by including the qualification as to a “particular”
dispute, as the term “particular” indicates that the request should identify the claim with sufficient
specificity “since vague requests for arbitration could not commence arbitral proceedings” [Lew
& Mistelis]. Since CLAIMANT’s ambiguous notification could not qualify as a valid request under
UML, the request for arbitration was only received by RESPONDENT on the 8th of June 2016, and
the proceedings should be considered commenced at that date. Consequently, as the running of the

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limitations period ceases only when the arbitral proceedings starts [Holtzmann & Neuhaus], the
Tribunal should dismiss CLAIMANT’s claims as the proceedings were not commenced within the
time limit that the Parties agreed upon in Section 21 DSA, which is sixty days after the failure of
negotiations. As it has been proven, the negotiations failed on the 1st of April 2016, therefore, the
initiation of arbitration must be made before the 31st of May 2016.

CONCLUSION OF THE SECOND ISSUE


37 Based on the above submissions, The Tribunal should reject C LAIMANT’s claims as inadmissible
for being submitted out of time. CLAIMANT did not comply with the requirements for initiating
arbitration under the CAM-CCBC Rules by providing an invalid POA and an incorrect amount of
registration fee. Since the dies a quo for initiating the arbitration under the DSA is sixty days after
the failure of negotiations, the valid POA and the correct amount of registration fee were only
provided after seven days from the deadline. Therefore, C LAIMANT’s request is belated and must
be dismissed.

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ISSUE 3: CLAIMANT IS NOT ENTITLED TO THE ADDITIONAL PAYMENT OF US


$2,285,240 FOR THE FAN BLADES
38 RESPONDENT fulfilled its obligations under the DSA since it accepted the delivery and paid the
invoiced price for the goods. However, CLAIMANT is alleging that RESPONDENT is entitled to the
additional payment of $2,285,240 for the fan blades due to the mistake in calculation from
CLAIMANT’S accounting department. RESPONDENT however, in good faith and with no intention to
take advantage of the mistake, as alleged by CLAIMANT- paid the amount invoiced as soon as it
accepted the delivery as it is RESPONDENT’S core obligation under DSA and CISG. Consequently,
the Tribunal should not award CLAIMANT the additional payment of $2,285,240 for the fan blades
since RESPONDENT fulfilled its obligations under CISG (A) and in compliance with the terms of
the Addendum (B). Finally, the Tribunal should not award interests to CLAIMANT under the CISG
(C).
A. The Tribunal Should Not Award CLAIMANT the Sum of US $2,285,240 for the Fan Blades
Under Both CISG and UNIDROIT Principles
39 As per agreement under section 20 of the DSA the applicable laws to this dispute are the CISG
and UNIDROIT Principles [R., Pg. 12 Exh C2]. The Parties added the Addendum to the agreement
that was drafted by RESPONDENT and sent to CLAIMANT [R., Pg. 28, Exh. R2]. CLAIMANT approved
the draft by replying with an acceptance email, “I also agree to the fixed exchange rate” and also
agreed that both Parties will sign it in the meeting that will be held at Wright Ltd. [R., Pg. 30, Exh.
R4]. Ms. Beinhorn’s acceptance clearly denotes the common intention of the parties and that
CLAIMANT intended to apply the fixed exchange rate to the entire agreement, since she did not
specifically state that the fixed exchange rate pertained to the Addendum. The Addendum that was
signed between both parties clearly stipulated a fixed exchange rate to the agreement in full as no
exchange rate was stipulated otherwise in the agreement. Consequently, RESPONDENT paid the full
amount according to the fixed exchange rate set out in the Addendum. Therefore, CLAIMANT’S
allegations to the additional payment of US $2,285,240 shall be dismissed.
I. RESPONDENT Fulfilled Its Obligations Under Art. 59 CISG
40 After taking delivery of the goods, RESPONDENT immediately paid the price for the goods as agreed
by the Parties [R. Pg. 10, Exh. C2, Para. 4.2]. Thus, RESPONDENT satisfied its obligations under
Art. 59 CISG which states that “The buyer must pay the price on the date fixed by or determinable

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from the contract and this Convention without the need for any request or compliance with any
formality on the part of the seller”.
41 Art. 59 CISG addresses that the buyer’s obligation to pay the purchased price is triggered
automatically by delivery of goods or documents, or as agreed in the contract, with no need for a
formal demand [Lookofsky] and without the need for any notice or compliance [Schwenzer].
Furthermore, it requires payment by the buyer without any affirmative action by the seller on the
payment date [Gabriel]. Art. 59 is frequently used when the buyer fails to perform his obligations
and does not pay the price [Cooking Accessories Case; Automatic Crucible Press Case; Fuel Case;
Single-screw Extruder Case]. However, RESPONDENT paid the amount according to the date fixed
by both Parties. Therefore, it fulfilled its obligations under Art. 59 CISG.
1. The Price for the Fan Blades Must Be Calculated According to Section 4 of the DSA
42 The Primary obligations, which arise from Art. 53 and 62 CISG, such as payment of the price and
taking delivery of the goods, have been fulfilled by RESPONDENT [R., Pg. 12, Exh. C3]. Therefore,
CLAIMANT may not invoke Art. 53 and 62 CISG against RESPONDENT because RESPONDENT took
delivery of the fan blades and clamps and paid the full amount for both.
43 The Parties agreed in Section 4 of the DSA on a price calculation formula, which indicates that the
minimum price per fan blade irrespective of production costs is US$ 9,975 while the maximum
price to be charged per fan blade is US$ 13,125 [R., Pg. 10, Exh. C2, Para. 4.1]. Since there is no
agreement and no reference to a fixed exchange rate in the DSA as CLAIMANT is claiming [CL
memo, Pg. 12], RESPONDENT was only obliged to the sum invoiced. Additionally, the Addendum
was signed with the intention to add to the DSA and not consider it as a separate agreement [R.,
Pg. 28, Exh. R2]. Consequently, the fixed exchange rate applied in the Addendum shall also apply
to DSA, considering that it regulates a formula for price calculation but not an exchange rate.
44 Additionally, when the parties were released from its parent company, to avoid any future
discussions on the applicable exchange rate, RESPONDENT insisted on having the exchange rate
governing the whole contract explicitly regulated in the Addendum to the contract. C LAIMANT did
not raise any objections to such a provision [R, Pg. 25, para 10].
45 Finally, the Parties in DSA agreed that delivery would be made by C LAIMANT and that
RESPONDENT would pay the amount agreed upon in Section 3 and 4 DSA [R., Pg. 10, Exh. C 2]
and the Addendum. The price for the fan blades would be US$ 20,438,560 considering the
exchange rate applied in the Addendum.

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a. RESPONDENT Paid the Purchase Price for Both Fan Blades and Clamps According to the
Attached Invoice and in Compliance with Art. 53 CISG
46 In the Addendum, the Parties agreed that a fixed exchange rate would be applied to the agreement
in full, thus, the invoice sent by Claimant should be in accordance to what the Parties agreed. Art.
53 CISG states “The buyer must pay the price for the goods and take delivery of them as required
by the contract and this Convention”. Should the buyer not perform its duties, the seller may
require the buyer to pay the price, take delivery or perform his other obligations [Fountoulakis].
However in the case at hand, RESPONDENT performed all its duties as required by Art. 53 CISG.
47 Moreover, Art. 53 CISG outlines the two most central obligation of the buyer, namely his duty to
pay for the goods and take delivery of them [Andersen]. RESPONDENT complied with the duties to
perform these obligations by paying the amount invoiced and taking delivery of the goods [R., Pg.
12, Exh. C 3]. Further, the principal obligations of the buyer are to pay the price and take delivery
of the goods “as required by the contract and this Convention”. In this regard, where the contract
provides for performance of the contract that departs from the rules of the Convention, the parties’
agreement prevails [2016 Digest]. The Parties agreed in DSA that RESPONDENT will take delivery
of the goods and pay the amount due upon delivery. Therefore the Parties agreement in DSA
should prevail.
48 RESPONDENT fulfilled its obligation by paying the full purchase price and taking delivery of the
goods according to the email by Mr. Lindbergh sent to Ms. Beinhorn, confirming that the goods
were delivered and payment was made according to the invoices received [R., Exh. C3, Pg. 12].
i. The Invoice Sent by CLAIMANT was In Accordance with the Addendum, Thus Art. 3.2.3
UNIDROIT is Not Applicable
49 In its submission, CLAIMANT claims that the mistake made in the invoice was based on a mistake
made by the accountant as he used the fixed exchange rate to calculate the price for the fan blades.
“Given that the mistake was of ‘sufficient magnitude’, the RESPONDENT was made aware of this
and as per article 3.2.3 of the UNIDROIT principles the contract have been avoided if the receiver
were not informed of the said mistake” [CL Memo, Pg. 11]. As per Article 3.2.3, “An error
occurring in the expression or transmission of a declaration is considered to be a mistake of the
person from whom the declaration emanated.” RESPONDENT paid as per the agreement made
between both Parties, and according to the Addendum where it clearly states that a fixed exchange
rate shall apply which makes both clamps and fan blades made under the same rate.

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50 Furthermore, according to the commentary provided in the UNIDROIT Principles, Art. 3.2.2
equates an error in the expression or transmission of a declaration with an ordinary mistake of the
person making the declaration or sending it, and if the error in expression or transmission is of
sufficient magnitude (especially if it has resulted in the misstatement of figures), the receiver will
be, or ought to be, aware of the error [UNIDROIT 2010]. RESPONDENT did not notice any error,
the invoice sent by CLAIMANT accounting department was correct according to the Parties’
agreement in the Addendum. RESPONDENT notified CLAIMANT that the invoice sent was in
conformity with the DSA and Addendum [R., Pg.16, Exh. C7]. Therefore Art. 3.2.3 shall not be
applicable.
b. CLAIMANT May Not Invoke Art. 62 CISG Since RESPONDENT Paid the Amount Due
51 CLAIMANT may not invoke Art. 62 CISG which states, “The seller may require the buyer to pay
the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy
which is inconsistent with this requirement”. It anticipates that, if the buyer does not perform, a
court will order such performance and will enforce that order by the means available to it under
its procedural law [CISG Secretariat Commentary]. Furthermore, the plain language of Art. 62
indicate that the buyer may be required to pay the price, accept the goods, or perform other
obligations unless the buyer or seller successfully avoids the contract [Fitzgerald]. However,
RESPONDENT fulfilled its obligations by paying the full amount agreed upon in both the DSA and
in the Addendum.
52 Additionally, Art. 62 is frequently implemented by judges and arbitrators in that it enables the
seller to require payment of the price of the goods sold. The Serbian Chamber of Commerce
awarded the seller the price for the goods sold [Medicaments Case; Paper handkerchiefs Case].
Yet, in the case at hand, RESPONDENT fulfilled its obligation in paying the price of the goods under
such article. Thus, Art. 62 CISG is inadmissible.
II. Art. 7.1.1 and 7.1.5 of the UNIDROIT Principles are Not Applicable to the Case at Hand
53 CLAIMANT’S application of Art. 7.1.1 and 7.1.5 UNIDROIT [CL Memo, Pg. 12] should not be
admissible because RESPONDENT paid the amount due on the date fixed in accordance to the DSA,
hence the Tribunal should dismiss CLAIMANT’S allegations that are built on the previous Articles.
54 Art. 7.1.1 states “non-performance is failure by a party to perform any of its obligations under the
contract, including defective performance or late performance”. “Non-performance” is defined as
a failure to perform any obligations of the contract. It encompasses defective performance and late

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performance [Perillo]. Moreover, Art. 7.1.5 deals with the situation where one party performs late
and the other party is willing to give extra time for performance. Consequently, RESPONDENT did
not breach Art. 7.1.1 and 7.1.5 UNIDROIT as it performed its obligations by accepting the delivery
on time and paying the amount invoiced immediately.
B. In the Addendum the Parties Agreed to Apply the Fixed Exchange Rate for Both Fan
Blades and Clamps
55 In the email Mr. Romario sent to Ms. Beinhorn for negotiating the easiest way to regulate the
purchase of the clamps, Mr. Romario suggested the inclusion of an Addendum and the terms that
shall be added to it, as one of the terms stated clearly that the exchange rate for the agreement is
fixed to US$ 1=EQD 2.01 [R., Pg.28, Exh. R2]. In her reply, Ms. Beinhorn agrees to Mr. Romario's
suggestion about linking the agreements of clamps and fan blades, by clearly stating “I also agree
to the fixed exchange rate”. This reveals that CLAIMANT and RESPONDENT shared the common
intention that the fixed exchange rate in the Addendum should be applied to the whole agreement
[R., Pg.30, Exh. R4].
56 Moreover, CLAIMANT may not claim that the application of the fixed exchange rate to the whole
DSA is irrational or not profitable to it as the blades were produced from 1st May 2014 onwards
when the exchange rate was US$ 1= 1.79 EQD [R., Pg. 56, Para 12]. Therefore, CLAIMANT did
not suffer any damage from the application of the fixed exchange rate to the price for both fan
blades and clamps.
I. The Parties Intention Should Be Determined According to Art. 8.1 CISG
57 In its submission, CLAIMANT is assuming that “The RESPONDENTS mistakenly believed the
Development and Sales Agreement on the fan blades was a fixed exchange rate” [CL Memo, Pg.
11] and suggests that “The RESPONDENT believes the mistake made in the invoice is the real
price of the fan blades” [CL Memo, Pg. 11]. Such statements denote that CLAIMANT is supposedly
unaware of the calculation to be made for the fan blades. To factually prove that CLAIMANT could
not have been unaware of RESPONDENT’s obvious intention, the Tribunal must consider Art. 8.1
of the CISG. The provision refers to the subjective intention of the parties, stating that “statements
made by and other conduct of a party are to be interpreted according to his intent where the other
party knew or could not have been unaware what that intent was.” Contrary to CLAIMANT’s
stipulation, the Addendum that was signed between the parties states that “The exchange rate for
the agreement is fixed to US$ 1= EQD 2.01” [Pg. 11, Exh. C2]. Accordingly, since the evidence

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establishes that the Parties did actually focus their minds on the language in dispute and gave it
the meaning now alleged by one of them (…) the court should give effect to their agreement or
assumption [McLauchlan]. Unless CLAIMANT is disregarding the explicit wording of the
Addendum, it cannot claim that it was unaware of RESPONDENT’s intent to apply the fixed
exchange rate to the fan blades. Additionally, in the Addendum, RESPONDENT wrote “Other terms
as per main Agreement”, clearly using a capitalized “Agreement” to refer to the DSA and followed
with “The exchange rate for the agreement is fixed to US$ 1= EQD 2.01” using a lowercase
“agreement” specifically signifying that the fixed exchange rate applies to the whole contract; the
DSA and the Addendum.
58 Furthermore, in an ICC case, the tribunal held that the application of article 8 (1) requires either
that the parties have a close relationship and know each other well, or that the import of the
statements or conduct was clear and easily understood by the other party [Magnesium Case]. Since
the Parties have a longstanding relationship, ever since being subsidiaries to Engineering
International and later joining to a contract in 2003 [Pg. 54, PO. 2, Para 5], CLAIMANT is at least
capable of knowing RESPONDENT’s intention as witnessed in the Addendum, through its
negotiations and its desire to make a binding offer to Earhart. Hence, the Tribunal is requested to
rely upon the guidance provided in the ICC case to the dispute at hand.
II. Under Art. 8.2 CISG, 4.1 and 4.2 UNIDROIT Principles a Reasonable Person Would
Interpret The Fixed Exchange Rate to Be Applied to the Whole Agreement
59 Since both Parties did not agree on an exchange rate in the DSA, a reasonable person would apply
the fixed exchange rate set in the Addendum to the entire DSA. Therefore, RESPONDENT requests
the Tribunal to interpret the fixed exchange rate in the Addendum according to the reasonable
person standard provided in Art. 8.2 CISG and 4.1(2) UNIDROIT.
60 Art. 8(2) stipulates that “statements made by and other conduct of a party are to be interpreted
according to the understanding that a reasonable person of the same kind as the other party would
have had in the same circumstances”. Consequently, the conducts of CLAIMANT is to be interpreted
according to the understanding of a reasonable person in the shoes of RESPONDENT [Honnold].
This reasonable person refers to a person with the same technical skills, linguistic background,
business experience and knowledge of prior dealings and past negotiations that took place between
the parties [Farnsworth].

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61 Furthermore, a Chinese corporation manufacturing steel products (plaintiff) and a Korean


corporation (defendant) selling steel products who had received and paid for goods from the
plaintiff. Company A (a non-party) is a Korean corporation that assisted the defendant in
concluding the contract with the plaintiff. Eventually, a dispute arose in regard to three contracts
entered into by the parties. Under Art 8.2 CISG, the Court determined that it is appropriate to view
the defendant as the party to the sales contract because the plaintiff maintained a continuous
transactional relationship with the defendant [Clout 1567].
62 Moreover, Art 4.1 UNIDROIT provides in the first paragraph that, (1) “A contract shall be
interpreted according to the common intention of the parties”. Whereas paragraph two lays out
the recourse to the understanding of reasonable persons (2) “If such an intention cannot be
established, the contract shall be interpreted according to the meaning that reasonable persons of
the same kind as the parties would give to it in the same circumstances”. Article 4.1 of the
Principles talks in terms of the interpretation of “contracts”. It starts with a subjective notion. If
the parties have a common intention, the common intention will prevail [Speidel]. If the common
intention of the parties cannot be determined, the principles would apply an objective test to
determine the meaning of the contract. The objective test is that the interpretation should be the
"meaning that reasonable persons of the same kind as the parties would give to it in the same
circumstances” [Perillo].
63 Additionally, Art 4.2 states that (1) “The statements and other conduct of a party shall be
interpreted according to that party's intention if the other party knew or could not have been
unaware of that intention”, (2) “If the preceding paragraph is not applicable, such statements and
other conduct shall be interpreted according to the meaning that a reasonable person of the same
kind as the other party would give to it in the same circumstances”. Article 4.2 of the Principles,
except for stylistic changes, is identical to Article 8(1), and 8(2) CISG. The primary standard is
the subjective intention of the party whose statement or conduct is in issue, provided, however,
that the other party knows or should know of that intent [Perillo].
64 As such, there is no doubt that the intention of the Parties was to apply the fixed exchange rate for
the price of both fan blades and clamps.

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III. In Earlier Contracts, Parties Adopted the Exchange Rate Which Was Profitable for
RESPONDENT
65 The Parties of the DSA had a commercial relationship ever since 4th of March 2003, where they
concluded the TRF 155‐II contract. Following that, the Parties signed the TRF 163‐I contract on
the 3rd of January 2005. In both contractual agreements, the Parties intended to adopt the exchange
rate profitable for RESPONDENT because of the more favorable tax regime in Mediterraneo [Pg. 54,
PO.2, Para. 5]. In the current contract, RESPONDENT had the same intention to apply the fixed
exchange rate, especially since it wants to make a largely binding price offer to Earhart SP [Pg. 31,
Exh. R5] for this reason, the Parties adopted a maximum price clause in Section 4 DSA [Pg. 10,
Exh. C2]. Consequently, it is pretty clear that the fixed exchange rate was to be applied to the DSA
and Addendum.
1. Under Art. 8.3 and 9.1 CISG, the Parties are Bound by Their Previous Practices
66 The Parties of the DSA signed similar contracts in 2003 and 2005 with the intention of applying
the exchange rate profitable for RESPONDENT [Pg. 54, PO.2, Para. 5]. Under Art. 8.3 CISG, “any
subsequent conduct of the parties” is useful to determine the intent of the parties and in Art. 9.1
CISG, the parties are bound “by any usage to which they have agreed and by any practices which
they have established between themselves.” Such obligation to be bound has extended to all
international commercial contracts by the UNIDROIT Principles as affirmed in a case held at the
CAICC Tribunal [Food products case].
67 The previous practices of the parties are just as important as the contractual provisions and they
assist in discovering the intention of the parties [Mittenthal]. Evidence of prior negotiations is
ought to be admissible not only for the orthodox purpose of assisting the court in determining the
factual background to the contract but also establishing that the parties reached an agreement or
held a common understanding as to the meaning of the words in dispute [McLauchlan]. That is to
say, to apply the fixed exchange rate of the more favorable tax regime of RESPONDENT [Pg. 54,
PO.2, Para. 5] is of a legally binding and enforceable nature. Nonetheless, in support of Art. 8.3
and 9.1 CISG, the Turku Court of Appeal held that “any applicable practice or usage has the same
effect as a contract” [Forestry Equipment Case].
68 Moreover, under Art. 8.3, negotiations are useful in determining the intent of the Parties. Such
negotiations are “relevant” to the interpretation of the agreement and should be given “due
consideration” since conduct subsequent to the agreement may shed light on the intentions and

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expectations of the parties. [Honnold]. The Parties in Section 4 of the DSA agreed on a maximum
price, which was in RESPONDENT’s interest since it wanted to make a binding offer to Earhart.
Such agreement was a reflection of a negotiation in 1st of May 2010 where RESPONDENT revealed
the same [Pg. 8, Exh. C1]. CLAIMANT agreed to what has been negotiated upon signing the DSA
and such acceptance is also reflected by the fact that it delivered the goods to RESPONDENT
[Scaforn International BV & Orion Metal BVBA v. Exma CPI SA]. In light of the same, the
Oberster Gerichtshof Supreme Court stated, “any previous negotiations and subsequent conduct
of the parties may indicate how they have actually understood their respective declarations of
intent” [Chinchilla furs case]. Hence, the Tribunal is to give consideration to such negotiations
and reasoning by the Supreme Court in view of Art. 8.3 of the CISG.
69 Furthermore, in Art. 9.1 a course of conduct by “A” in past transactions may create an expectation
by “B” that will bind “A” in a future contract [Honnold]. This suggests that if a course of conduct
is initiated by a party, such conduct leads the parties to believe that the same will be repeated in
the future. Indeed, under the two contracts between the Parties, “the Parties always applied the
exchange rate at the time the contract was concluded [Pg. 31, Exh. R5]. Moreover, in an ICC
arbitration case, the arbitral panel has found that a seller was required to deliver replacement parts
promptly because that had become “normal practice” between the parties [Industrial Equipment
Case].
70 In compliance with Art. 8.3 and Art. 9.1 of the CISG, the Parties are bound by their previous
practices and that RESPONDENT intended to apply the fixed exchange rate when signing the
Addendum, in reflection of the Parties previous co-operations and its intention to make a binding
offer to Earhart of which CLAIMANT is aware of.
IV. The Parties Must Respect the Terms in the Addendum Under the Principle Pacta Sunt
Servanda
71 According to the principle pacta sunt servanda, which calls for the sanctity of contractual
commitments [Keller], the Parties must respect the stipulations in the Addendum signed on 26
October 2010 [Pg. 11, Exh. C2]. “Pacta sunt servanda is a principle which requires that contracts
entered into freely and voluntarily should be fulfilled. Agreements so entered should be respected
and obligations thereto should be fulfilled” [Sasfin v. Beukes]. The principle is a paramount feature
of the law of contract, which is why specific performance has been adopted under the CISG as a
primary remedy [Liu]. In Den Braven v. Pillay, the Court emphasizes the importance of pacta sunt

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servanda in the sense that the sanctity of contracts is part and parcel of the rule of law [High Court
of South Africa]. CLAIMANT, may not, when it finds it inconvenient, repudiate the contractual terms
of the Addendum as this undermines the principle pacta sunt servanda; one of the foremost and
integral principles [Gabčíkovo-Nagymaros Case]. The rule pacta sunt servanda is the basis of
every contractual relationship" [Liu]. In this regard, CLAIMANT is obligated to meet the obligations
as stipulated in the Addendum since he entered into it freely and voluntarily.
C. CLAIMANT is Not Entitled to Interest Under Art. 78 CISG
72 In its submission, CLAIMANT claims that it is entitled to interest based on delay subject to Art. 78
CISG [CL Memo, Pg. 10]. According to Art. 78 CISG, “If a party fails to pay the price or any
other sum that is in arrears, the other party is entitled to interest on it..”. Notably, in the CIETAC
case argued upon by CLAIMANT, the Tribunal applied Art. 78 CISG when the buyer “took the
contractual goods without paying the contract price on time” [CL memo, pg. 10]. Yet in the case
at hand, RESPONDENT duly fulfilled its contractual obligations and paid the full price immediately
without delay on 15 January 2015 [Pg. 14, Exh. C5]. Moreover, Art. 78 CISG is applied when the
buyer fails to pay any other sum that is in arrears [Nicholas]. Considering that RESPONDENT not
only paid a partial sum but the full price, Art. 78 is by no means applicable. Additionally, since
RESPONDENT did not delay payment and delay is a matter of domestic law and not the CISG, which
CLAIMANT failed to address [Extruding machine case], CLAIMANT’s allegation is groundless and
hence it is not entitled to any interest.

CONCLUSION OF THE THIRD ISSUE


73 Based on the above submissions, the Tribunal is requested to dismiss CLAIMANT’S claim to the
additional payment of US $ 2,285,240 for the fan blades since RESPONDENT fulfilled its
obligations under both CISG and UNIDROIT Principles. Additionally, the Parties in the
Addendum agreed to apply a fixed exchange rate for both fan blades and clamps. Therefore,
CLAIMANT’S allegations to not apply the fixed exchange rate set in the Addendum to the entire
agreement should be disregarded as it is clear that the intention of the Parties was to stipulate a
common exchange rate rule for converting the price of both the fan blades and clamps.

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ISSUE 4: CLAIMANT IS NOT ENTITLED TO THE REIMBURSEMENT OF THE


INSPECTION FEES DEDUCTED BY THE CENTRAL BANK
74 Under the DSA and the applicable laws to this dispute, RESPONDENT fulfilled its obligation by
paying the full amount stated in the invoice. However, Equatoriana sets out regulations to inspect
the transfers of amounts of money, which exceed US$ 2 million and deduct 0.5% from the sum
transferred. CLAIMANT is claiming for the reimbursement of such costs. However RESPONDENT
fulfilled its obligation under both CISG and DSA. Therefore, RESPONDENT is not obliged to
reimburse such amount under CISG (A). RESPONDENT could not have foreseen such fees as they
were not agreed upon in DSA and CLAIMANT always bore such fees in previous practices (B).
Under UNIDROIT Principles, RESPONDENT complied with its obligations by bearing the costs
of the performance (C).
A. The Tribunal Should Not Order RESPONDENT to Pay the Amount of US $102,192.80 for
the Inspection Fees According to the CISG
75 In its submission, CLAIMANT claims that RESPONDENT breached Section 20 of the DSA by omitting
to pay the levy charges [CL Memo, Pg. 13]. Yet, RESPONDENT fulfilled its obligations and paid the
amount in the invoice sent by CLAIMANT [R, Pg. 12, Exh. C3] and EQB have confirmed in its letter
stating that, “We can confirm that SantosD KG effected the payment of US$ 20,438,560 to your
account.” [R, Pg 17, Exh. C8]. However, under the regulation ML, the EQB had to deduct 0.5%
from the sum of the money. Such fees deducted by the EQB were an extraordinary fees and not
the normal bank charges, which the Parties have agreed on in Section 4.3 DSA. [R, Pg 10, Exh.
C2]. Accordingly RESPONDENT had fulfilled its obligation and is not obliged to pay the amount
deducted by the EQB. Thus, both the CISG and the UNIDROIT Principles do not encompass
inspection fees nor do they oblige the parties to pay it.
I. RESPONDENT Fulfilled Its Obligations Under Art. 53 CISG, Whereas CLAIMANT
Breached Art. 35.2 CISG
76 In response to CLAIMANT’s argument regarding the breach of contractual obligations [CL memo,
Pg. 13], RESPONDENT fulfilled its duties under Art. 53 CISG, which establish that “The buyer must
pay the price for the goods and take delivery of them as required by the contract and this
Convention” [2016 Digest]. In other words, the buyer's obligation under the contract is paying the
price for the goods delivered [Butler] as “Article 53 describes the general responsibilities of the
buyer in an international sales transaction. This section recognizes the primacy of the contract in
defining the parties' obligations, and this article applies absent a contractual agreement between

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the parties to the contrary. Under the CISG, as with any law that governs the sale of goods, the
primary obligations of the buyer are those obligations that arise from the contract with other
obligations that arise from the underlying substantive law” [Gabriel]. RESPONDENT fulfilled its
obligation by paying the price in the invoice sent by Ms. Beinhorn on 15 January 2015 [R., Pg. 12,
Exh. C3]. “The buyer must pay the price either as fixed in the contract or as determined according
to contractual terms” [Schlechtriem]. Accordingly, RESPONDENT paid the amount agreed upon in
the DSA and the invoice and consequently, CLAIMANT is not entitled to the outstanding amount
under Art. 53 CISG.
77 Although Art. 35.2 was not addressed by CLAIMANT [CL Memo], it is important to note that
CLAIMANT failed in performing its obligation under such provision. Looking into the Mussels
Case, a Swiss seller delivered mussels from New Zealand to the German buyer in Germany, where
they were inspected and determined to contain cadmium at levels exceeding those recommended
in German health regulations. The court, however, held that Art. 35.2 did not, on the facts of this
case, require the seller to deliver goods that complied with the public regulations of the buyer’s
jurisdiction. The court ruled that the seller cannot normally be expected to be familiar with those
requirements and thus it should not be liable for failure to meet those standards. Per contra there
are three exceptions to such rule and those exceptions are: “1) if the seller’s own jurisdiction
imposed the same standards; 2) if the buyer had pointed out the regulations to the seller; or 3) if
the seller knew or should have been aware of the standards because of “special
circumstances””[Fletchner]. In the case at hand, none of the exceptions are met.. RESPONDENT
would have never known about the ML because such regulations are not applied in Mediterraneo
[R, Pg.55, POII, Para 8]. Accordingly, the rule of the Mussels Case certainly has persuasive
authority, where lots of courts have applied the same ruling. Moreover the Oberster Gerichtshof
established that “requirements which apply in the Contracting State of the buyer were to be taken
into consideration only if they also exist in the Contracting State of the seller, or have been agreed
upon by the parties or made known to the seller according to article 35(2)(b) CISG” [Machines
Case] as well as in [Scaffold hooks Case], the High Court of New Zealand [Trucks Case] and Cour
d’appel (Appellate Court) Versailles [Toys for infants Case] followed this approach. Thus,
RESPONDENT is not obliged to pay the inspections fees. As a result, RESPONDENT is not obliged to
comply with public laws, hence it is impossible to oblige RESPONDENT to comply with

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administrative regulations set out by a national bank of CLAIMANT. Consequently the case at hand
should be regarded in the above-mentioned rules.
II. CLAIMANT’s Respect of Art. 30 CISG Does Not Imply RESPONDENT’S Obligation to Pay
the Inspection Fees
78 Regarding the issue raised by CLAIMANT in reference to the performance of its contractual
obligations under Art. 30 CISG [CL Memo, Pg. 13] which states that: “The seller must deliver the
goods, hand over any documents relating to them and transfer the property in the goods, as
required by the contract and this Convention”, the argument does not affect the decision of the
Tribunal in the case at hand. Indeed, RESPONDENT is not denying CLAIMANT’s compliance with
Art. 30, where it sent an email on the 15th January 2015 to CLAIMANT, by saying: “I herewith
confirm that yesterday we received the blades and the clamps in good order. A first examination
revealed no problem” [R, Pg.12, Exh. C3], but he is requesting the Tribunal to confirm that
RESPONDENT fulfilled its obligations as well. As such, CLAIMANT's compliance with its obligation
does not entail that RESPONDENT pay the inspection fees deducted by the EQB.
III. RESPONDENT Undertook the Proper Steps to Enable the Payment of the Purchase Price
According to Art. 54 CISG
79 Under Art. 54 CISG: “The buyer’s obligation to pay the price includes taking such steps and
complying with such formalities as may be required under the contract or any laws and regulations
to enable payment to be made… and the “enabling steps” article served a useful purpose in
indicating that the buyer’s obligation may encompass several steps prior to the date of payment,
and also gave an indication of the form in which the obligation to pay the price or assure payment
was required from the buyer” [Gonzalez]. Accordingly RESPONDENT fulfilled the obligation a
buyer must take in order to enable the payment to the seller by paying the price in the invoice sent
by CLAIMANT [R., Pg12, Exh. C3]. Therefore, not paying the fees deducted by EQB does not
constitute breach of such article. Investigation fees are considered as administrative regulations
and it is not in RESPONDENT’S control to know about such regulations and/or to comply with it.
Such regulations are only implemented in Equatoriana and not in Mediterraneo. Since this type of
regulation is applicable only in specific circumstances and is not a general regulation applicable
for every payment, it is not reasonable to oblige RESPONDENT to take into consideration this type
of internal banking regulation and pay it. The Russian Federation Chamber of Commerce and
Industry in the case of Equipment held that the buyer of goods limited his conduct to sending a

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letter to his bank asking that payment be made to the seller. He did not make an effort to ensure
that he had freely convertible currency to effect payment to the seller, thus falling short of what is
expected from a buyer under Article 54 [Equipment Case]. However, in the case at hand,
RESPONDENT fulfilled the enabling steps under Art.54 and this was confirmed by the EQB.
B. RESPONDENT Is Not Obliged to Pay the Extraordinary Bank Charges for the Money
Laundering Investigation According to the Development and Sales Agreement and
CLAIMANT’s Previous Practices
80 Bank charges definition varies between the countries, however the most common definition is:
“any fee that a bank assesses on an account. An example of a bank charge is a monthly or annual
fee for the privilege of maintaining an account. Other bank charges include overdraft fees (which
are placed on a checking account when a holder withdraws more money than he/she has) and
inactivity fees (which occur when a holder does not conduct a transaction for a certain period of
time). Bank charges form a significant portion of banks' revenue” [Financial dictionary]. Thus,
inspection fees are not classified as normal bank charges. Therefore, RESPONDENT is not compelled
to pay the extraordinary inspection fees deducted by EQB, since such fees were not addressed in
Section 4.3 of the DSA [R., Pg. 10] nor do any comparable fees exist in Mediterraneo and finally,
CLAIMANT has always bore such fees in its previous contracts [R, Pg 55, POII, Para 55].

I. In Section 4.3 of the Development and Sales Agreement the Parties Agreed that
RESPONDENT Would Bear Only Ordinary Bank Charges
81 "Special provisions in the buyer's country are of relevance only if they do apply likewise in the
seller's country or if they were agreed upon or if they had been made known to the seller"
[Staudinger/Magnus, Frozen Pork Liver Case]. Under section 4.3 in DSA “The BUYER will
deposit the purchase price in full into the SELLER’s account at the Equatorianian National Bank,
Ocean Promenade 3, Equatoriana IBAN 120934566798; SWIFT EQXPL6. The bank charges for
the transfer of the amount are to be borne by the BUYER” [R., Pg. 10]. Accordingly, RESPONDENT
is only obliged to pay the ordinary bank charges, because there was no special provision in
RESPONDENT's country, which stipulates same rules as the Equatoriana ML. Thus, RESPONDENT
fulfilled its obligation under this clause as inspection fees were an extraordinary bank charge and
the Parties have only agreed on the payment of the ordinary bank charges. Therefore, CLAIMANT
is not entitled to recover such fees.

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II. In Any Case, RESPONDENT Could Not Have Foreseen the Inspection Fees as No
Comparable Fees Exists in Mediterraneo
82 In response to CLAIMANT’s argument that Respondent knew about the inspection fees for ML [CL
Memo, Pg. 13], it has to be noted that Respondent could not have foreseen such fees as “Claimant
was the only supplier or customer from Equatoriana and no comparable levy exists in
Mediterraneo” [R, Pg 55, POII, Para 55]. Also, CLAIMANT did not inform RESPONDENT on such
regulations. The Oberster Gerichtshof confirmed that if “the buyer had failed to specify particular
requirements as to the quality of the product no liability of the seller was assumed” [Frozen Pork
Liver Case]. Accordingly, in the case at hand, CLAIMANT failed to inform RESPONDENT on such
regulations. Therefore, RESPONDENT is not obliged to pay the inspection fees and could not have
foreseen such fees, since no comparable fees exist in Mediterraneo.
III. In Previous Dealings CLAIMANT has Always Paid the Inspection Fees
83 “A course of conduct that is the understood and accepted way of doing things over an extended
period of time, and thus, mutually binding and enforceable” [Mittenthal]. Thus, CLAIMANT is
bound by its previous course of dealings and is obliged to bear the inspection fees deducted by
EQB. Since CLAIMANT previously have paid the inspection fees in its earlier cooperation with
JumboFly [R, PO2, Pg55, Para 9] as well as with JetPropulse [R, Pg 26, Para 19] , "the arbitrator
may rule in favor of practices that have existed for a long time, happen frequently, clearly conflict
with the contract, and were clearly known to both parties" [Cohen]. Therefore, CLAIMANT is the
party, which should bear the inspection fees deducted by the EQB as it did so in its previous
conduct. “A past practice is used to modify, amend or even contradict a clear and unambiguous
provision of the contract” [Mittenthal]. As such, the Parties conduct is binding and enforceable.
The Parties intention in the DSA was concluded to mean only the ordinary bank charges. However,
the inspection fees is an extraordinary bank charge since there is no explicit agreement on such
costs previous dealings should be enforced in this dispute. Accordingly, RESPONDENT is not
obliged to pay such fees.
C. RESPONDENT Fulfilled Its Obligations by Bearing the Costs of the Performance
According to the UNIDROIT Principles
84 RESPONDENT has transferred the amount in full as it was agreed upon between both parties in the
DSA, and pet invoice sent by CLAIMANT on the day of delivery. RESPONDENT has fulfilled its
obligations under the UNIDROIT Principles.

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I. Article 6.1.11 UNIDROIT Principles Does Not Encompass Inspection Fees, Therefore
RESPONDENT Is Not Obliged to Reimburse CLAIMANT
85 In its submission, CLAIMANT stated that RESPONDENT is obliged to transfer the amount previously
agreed upon between both Parties for the clamps and fan blades and the amount that was deducted
by the EQB. However, doing so will result in a transfer of a lesser amount and lead to not only a
breach of contract but also of the UNIDROIT and CISG [CL Memo, Pg. 13]. As agreed upon
between the parties in the Addendum, RESPONDENT transferred the amount in full as per the
amount invoiced by CLAIMANT.
86 According to Art. 6.1.11 that clearly states: “Each party shall bear the costs of performance of its
obligations”, RESPONDENT fulfilled its obligation of bearing the costs of the performance and
transferred the full amount to CLAIMANT. Furthermore, the commentary stipulates that the
performance of obligations often entails costs, which may be of different kinds: transportation
costs in delivering goods, bank commission in making a monetary transfer, fees to be paid when
applying for a permission, etc. [UNIDROIT 2010]. In principle, such costs are to be borne by the
performing party. The inspection fees are not considered as bank commission fees because the
money was excluded by the bank for investigation in regards of money laundering [R., Pg. 17,
Exh. C8].
87 Consequently, since Art. 6.1.11 UNIDROIT Principles does not include the inspection fees,
RESPONDENT is not obliged to reimburse CLAIMANT for the amount deducted by the bank.

CONCLUSION OF THE FOURTH ISSUE


88 Based on the above submissions, the Tribunal shall dismiss the claims raised by CLAIMANT under
the CISG and UNIDROIT Principles for the reimbursement of the amount deducted by EQB since
RESPONDENT fulfilled its obligations under the DSA, the CISG and UNIDROIT Principles.

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REQUEST FOR RELIEF 


In response to the Tribunal’s Procedural Orders, Counsel makes the above submissions on behalf
of RESPONDENT. For the reasons stated in this Memorandum, Counsel respectfully requests the
Arbitral Tribunal to find that:

 The Tribunal should grant RESPONDENT’s request for security for costs [Issue 1]. 

 The Tribunal should dismiss claimant’s request as belated and therefore inadmissible [Issue
2].
 CLAIMANT is not entitled to the additional payment of $2,285,240 for the fan blades [Issue 3].
 CLAIMANT is not entitled to the reimbursement of the inspection fees deducted by the central
bank [Issue 4].

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CERTIFICATE

Riffa - Kingdom Of Bahrain, 19 January 2017

We hereby confirm that this Memorandum was written only by the persons whose names are
listed below and who signed this certificate.

(signed) (signed)


Sara Jassim Abdulla Amina Abduljabbar Saleh

(signed) (signed)

Noor Sami Alalawi Fatema Ahmed Alaraij

(signed) (signed)


Haya Zaal Albuflasa Isra Abdulkarim Alaradi

(signed)
 (signed)


Reem Hassan El-Asaad Fatema Fadhel Almedaifa

(signed)


Nayla Mohamed Ramadhan

XXV

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